Are Your Leaders and Employees Properly Covered? A Guide to D&O and EPLI Insurance

As a business owner, HR manager, or executive, you likely have general liability insurance in place to protect your company against bodily injury, property damage, and certain legal costs. What it doesn’t protect are the individuals making critical decisions like your directors, officers, and HR team. Are they personally protected from the risks that come with leadership? Without the right coverage, those decision-makers could face lawsuits that put their personal assets at risk, even if they acted in good faith.

That’s where Directors and Officers (D&O) insurance and Employment Practices Liability Insurance (EPLI) come in. Together, these coverages safeguard both leadership and employees, addressing exposures that are increasingly common in today’s business environment. No matter your business, understanding how these policies work can provide valuable protection.

What Is D&O Insurance?

Directors & Officers (D&O) insurance protects senior leaders from claims alleging mismanagement, breach of fiduciary duty, financial misrepresentation, and other governance-related issues. These claims can come from shareholders, investors, regulators, vendors, or even competitors.

A D&O policy typically covers:

• legal defense expenses, including attorney fees, court costs, and expert witnesses
• settlements and judgments awarded to plaintiffs
• costs associated with regulatory investigations, such as those from the SEC, IRS, or state agencies

Real-World Claim Triggers

Lawsuits against directors and officers often stem from decisions made in the course of business. For example, disputes may arise during a merger or acquisition, or when an organization is accused of failing to comply with regulatory requirements. Shareholders may allege mismanagement of funds, while creditors can pursue leaders personally if debts are unpaid during insolvency.

Myths That Put Leaders at Risk

Many leaders assume D&O insurance only matters for publicly traded companies. In reality, private firms face many of the same risks, from investor disputes to competitor lawsuits. Another misconception is that an LLC structure offers complete protection. While it may shield personal assets, it doesn’t cover the cost of defending a lawsuit or paying settlements. D&O insurance fills that gap.

What Is EPLI Coverage?

While D&O protects leadership from outside stakeholders, Employment Practices Liability Insurance (EPLI) addresses risks that come from within the organization. EPLI provides coverage when employees or job applicants bring claims related to workplace conduct and treatment.

Common allegations include:

• wrongful termination when an employee feels they were dismissed without just cause
• discrimination based on race, gender, age, disability, religion, or other protected categories
• sexual harassment, including claims tied to workplace culture or management oversight
• retaliation against employees who report misconduct or participate in investigations
• hostile work environment claims where behavior is alleged to be toxic or abusive
• wage and hour disputes, such as unpaid overtime or misclassification of employees

Even organizations with strong HR teams are vulnerable. Claims can arise from a single employee complaint, a misstep during a hiring process, or new laws around workplace rights. EPLI helps manage the cost of defending these claims, which often exceeds what most companies expect.

The Equal Employment Opportunity Commission (EEOC) recently updated its harassment guidance for the first time in 25 years, broadening protections for LGBTQI+ workers and adding rules around online harassment and remote work. Pay transparency laws are spreading, requiring employers to disclose salary ranges. Meanwhile, retaliation remains the most common discrimination charge, representing more than half of EEOC filings. Employers that rely on artificial intelligence in hiring also face risk of biased algorithms leading to discrimination claims.

Prevention Still Plays a Role

Insurance is critical, but prevention strengthens both workplace culture and risk management. Employers should maintain a thorough employee handbook, conduct regular anti-harassment and anti-discrimination training, investigate all complaints promptly, and document employment decisions carefully. These practices not only reduce exposure but also improve employee trust and morale.

Both D&O and EPLI Are Important (And Different)

At first glance, D&O and EPLI may seem similar. Both cover lawsuits, and both protect leadership. But the exposures they address are distinct:

• D&O insurance focuses on leadership liability from external stakeholders, such as investors, regulators, creditors, and competitors.
• EPLI coverage addresses HR liability from internal stakeholders, including employees, former employees, and job applicants.

Together, they close coverage gaps that general liability or other business policies simply don’t address. Without one or the other, you leave your organization and its leaders exposed.

Who Needs D&O and EPLI?

Any organization with a leadership team and employees should evaluate D&O and EPLI. Companies face heightened risk if they have:

• a board of directors or advisory board
• outside funding or investor relationships
• more than 10 employees
• complex HR practices or frequent hiring
• exposure to regulatory oversight in industries like healthcare, education, or finance
• periods of change, such as mergers, acquisitions, or leadership turnover

Higher-Risk Profiles

• Nonprofits, which often have volunteer boards and limited resources to handle claims
• Professional services firms, where reputation is central to success
• Tech startups, which grow quickly under investor pressure and evolving HR practices
• Healthcare and education organizations, where both regulation and employee interaction are intensive

Even if your organization has never faced a claim, the cost of one lawsuit can be devastating. These coverages are designed to protect your balance sheet and your people.

How to Evaluate or Add D&O & EPLI Coverage

The first step is a risk profile assessment. Ask:

• Do we have formal HR policies and employee training programs?
• Have we experienced claims, complaints, or investigations in the past?
• Are we entering a phase of growth, restructuring, or leadership transition?
• Do we have governance protocols to ensure sound decision-making?

This assessment helps identify vulnerabilities and determine the appropriate coverage levels.

Once you understand your exposures, work with a knowledgeable insurance broker who can:

• explain exclusions and clarify what’s covered
• recommend policy limits and deductibles that fit your risk profile
• benchmark your program against peer organizations in your industry

Look for a broker who understands your business model, growth trajectory, and regulatory environment. They should be able to tailor coverage to your unique needs, ensuring you don’t pay for protection you don’t need or leave critical gaps unaddressed.

Tips for Insurance Buyers

The right approach to purchasing D&O and EPLI coverage can strengthen both protection and cost efficiency. Consider these steps as you evaluate your options:

For D&O Insurance:

• Review your program structure and limits regularly to keep pace with organizational growth.
• Assess how your leadership team uses technology, especially artificial intelligence, and establish clear policies to reduce liability.
• Pay close attention to regulatory disclosure requirements, particularly if you’re considering an IPO, merger, or acquisition.

For EPLI Coverage:

• Update your employee handbook and policies to reflect new EEOC harassment guidance, pay transparency laws, and protections for pregnancy-related conditions.
• Document employment decisions thoroughly, including complaints, evaluations, and terminations, to help defend against potential retaliation claims.
• Provide regular training for managers on discrimination, harassment prevention, and complaint handling, since underwriters often view these as signs of reduced risk.

Protecting Your People Is Protecting Your Business

Leadership decisions and employment practices are under more scrutiny than ever. One claim can drain time, money, and morale, but the right insurance provides both peace of mind and financial protection.

At AssuredPartners, we work with mid-sized companies, nonprofits, and professional service firms to build resilient insurance programs that protect leaders and employees alike. D&O and EPLI insurance are strategic tools that demonstrate your commitment to governance, workplace culture, and long-term success.

Disclaimer:
The information contained herein is offered as insurance industry guidance and provided as an overview of current market risks and available coverages and is intended for discussion purposes only. This publication is not intended to offer financial, tax, legal or client-specific insurance or risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms, and/or conditions, and should not be relied on for coverage interpretation. Actual insurance policies must always be consulted for full coverage details and analysis.